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aa A $1,000 maturity value bond currently has 15 years left to maturity. The bond has an 8.5% coupon rate and pays interest annually. If
aa
A $1,000 maturity value bond currently has 15 years left to maturity. The bond has an 8.5% coupon rate and pays interest annually.
- If you want to earn a 7% rate of return, how much would you be willing to pay today for this bond?
- Suppose you buy the bond for the value you calculated in part a. After holding the bond for 2 years and receiving 2 interest payments, you sell the bond for $1,032.43. What annual, compound rate of return have you earned over this 2 year period?
- Suppose you buy the bond for the value you calculated in part a. After holding the bond for 2 years and receiving 2 interest payments, you sell the bond. What price must you receive (at time 2) to earn your desired 7% rate of return?
- Suppose you buy the bond for the value you calculated in part a. After holding the bond for 3 years and receiving 3 interest payments, the bond defaults with no chance of paying you anything more. What annual, compound rate of return have you earned over this 3 year period?
Please show/ explain using excel functions/formulas
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Financial statements
Authors: Stephen Barrad
5th Edition
978-007802531, 9780324186383, 032418638X
